Walker Makes Video Pitch For State-Created Financial Control Board

David Walker, former U.S. Comptroller General, has issued a video appeal for creation of a financial control board to oversee city finances. Such a process would require support of Governor Dan Malloy and the state legislature. Mayor Joe Ganim who opposes state financial oversight inherited a Bridgeport Financial Review Board upon his election in November 1991 during JG1 that had been created by the state when Democratic Mayor Tom Bucci requested assistance in 1988 to close accumulated budget deficits. The role of the review board was to ensure that city budgets were in balance. It completed business in the summer of 1995 satisfied that Ganim and city financial officials could follow their own fiscal course.
Walker and other city residents have reactivated the watchdog group Citizens Working For A Better Bridgeport that also includes a website with a petition in support of a control board.

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41 comments

Once again Mr. Walker gives no examples of any State Law or Legal Statute of a “Control Board.” The website has no information about a “Control Board.” There is no effort to make this a broad-based outreach. What is the timeframe of this “Control Board,” will they have the power to do away with union contracts, employees health benefits, cutting pensions to those who are retired and spouses of those who have deceased? Who selects the “Control Board” and how do you take someone off the “Control Board?” I have more concerns but not now.

Ron,
There are financial problems in Bridgeport of many descriptions, including the former Office of Policy Management Director coming back for a “promised ‘double dip'” in his last year in office that the public now hears about for the first time, because the City formerly was, and still is, very secret and close to the vest when spending money, especially that which was never fully described or authorized in budget deliberations.
Why don’t we keep looking and describing the problems that have led us to tax desperation and keep all of those in mind without prematurely looking at what design ‘a financial authority’ might take? It should be legal and lawful, and be more OPEN, ACCOUNTABLE, and TRANSPARENT as well as HONEST, right? What’s the problem from your viewpoint if you have one or more? I know you want to know Walker’s ideas, but banging away at that is likely counterproductive and unsatisfying at the moment while lots of people need to understand the depth of the problems we face. Can you assist in educating readers to the problems, issues and concerns before getting into ideas, alternatives or solutions? Time will tell.

John Marshall Lee, my questions and concerns are in the spirit of you, JML. You question the council and the mayor for concerns that you have and I’m doing the same to Dave Walker, details, not a video about his bio.

Ron,
You should worry. Walker and JML are asking people to sign on to a Financial Control Board but they either don’t know or won’t say what the differences are between this and a FRB.
Do they know? Do they refuse to spell it out? Doesn’t sound like JML is eating his OATS on this one.
It would appear to be a straightforward question. Maybe JML doesn’t know but is afraid to admit it.
And as you asked, is this defined by state legislation.
For the city to seek assistance in financial matters is one thing. For the city to surrender all financial controls to an outside authority is totally something else.
Time will tell, but unfortunately it may be too late.

Bob and Ron,
Some five years ago, when I had less knowledge and experience around municipal finances, but at a time when you gentlemen were long-term experienced and wise, we were able to see our public school system foundering without a Superintendent for six months or so and concerns that an $18 Million budget gap would cause a layoff of 400 teachers. Two interim Superintendents have been working for the City and yet changes in State law but not in fair funding may indicate that we will be in similar position within the next year. Is that progress?
The Bridgeport Housing Authority changed its name within that same time period to Park City Communities and it sounds like some temporary fiscal resolution happened but it is not something the Mayor’s office has informed us about. Is it reasonable to ask why not? Lots of money involved like the school system. Lots of jobs? Lots of people’s lives and quality thereof?

I have noted the City has slipped into the red on its balance sheet. Did the Mayor, Finch or Ganim, discuss this matter publicly over the last 20 months? Isn’t the balance sheet a part of the fiscal picture that goes into our low investment grade ratings for bonds (as opposed to TANS that are usually paid off in a few months)?

Where are the financial controls in the City currently? Not on the City Council I suggest after watching their behavior at budget time for more than five years as well as in between. Our City Fund Balance has steadily decreased since the Ganim1 administration left office and any deficit recorded for the recently closed 2015-16FY is likely to further reduce that, absent some sleight of hand.

There are many things I do not know. Never afraid to admit it. And always happy when Phil Smith enters the conversation with the skills of a historian and former public administrator. I am not an accountant or attorney as I have shared more than once, but that has not stopped me from providing continuing info to my fellow citizens through OIB. Perhaps the nature of an outside body will be affected by State law, but it also may be affected by the nature of the info provided about City finances at a given moment. Mayor Ganim provided an OP-ED in the CT Post today. Perhaps OIB will print that for alternative opinions as to his sense of things or to the accuracy of what he states as fact. Has a list of City employees been published yet, union, non-union, appointed (grants even), so we can see where cuts happened, or not? Time will tell.

Bob, I’m in total agreement with you. The people are being dragged along with Dave Walker’s idea but the sad part is he gives them no information about what he’s dragging them into. The question was being asked time and time again to tell us what a control board was in the State of Connecticut but nothing. JML couldn’t answer the question but thankfully Phil Smith took the time to provide the answer and the information concerning review/control boards. Dave Walker wants to do to Bridgeport what his namesake Gov. Scott Walker did to Wisconsin. Bob, you notice Walker only gave one solution to Bridgeport’s financial problem and that was control, he gave no options, it was going to be his way and nothing else. He wouldn’t even inform CW4BB of what the state laws are about review/boards. A Republican is a Republican, I’m not saying what the Democrats are doing is working but we know what the Republicans will give us but Walker will now say he’s not a Republican.

Dave Walker, where’s the information? You make statements then you give NO supporting information. It’s your way or nothing else and all you have done is talk. Leaders lead with facts and information to make change and do not. You in general terms with NO direct details, NOTHING Dave, the video is like a campaign ad for yourself.

Ron,
Read the PROMESA bill regarding the power that Board will have. I plan to address this issue in my remarks at the 8/1 City Council meeting. Why don’t you come to listen and we can meet and talk afterwards?

Dave, I’ve spoken out that I was in favor of the financial review board like the first one that Bridgeport had. I’ve been suggesting it along with others to bring it back. I’ve pointed out how firefighters took zero pay raises for three years but with the Dr. Ukeles and the Management Advisory Committee Report we saw great improvement in the fire department. As it has been pointed out by Phil Smith, there was no followup with what the review board did and the City’s master plan, Dr. Ukeles and the Management Advisory Committee Report.

This is in what you post, it’s a “general” opinion. Once again you give no examples of any State Law or Legal Statute of a “Control Board” for Connecticut.

The opinions expressed in this Working Paper are the author’s and do not represent official positions of the Mercatus Center or George Mason University.

3 There is some difficulty in summarizing state statutes regarding municipal fiscal emergencies due to the complexity of conditions and triggers that may occur throughout the process. The discussion in this paper refers to the decision point in the law whereby a receiver or financial control board has been appointed. This simplification may gloss over some of the exact details of the process leading up to such an appointment. 4 Other reports on state-based municipal fiscal emergency laws have taken different approaches in classifying and reporting on these issues. Typically, those reports have looked at a broader set of state interventions, such as emergency financing programs or receivers appointed for revenue bond defaults. This report specifically focuses on Dimock-style state intervention in local affairs such as state-appointed receivers or financial control boards only and also examines in more detail some specific characteristics of those programs, such as exit strategies, that are often ignored. Several reports were consulted following an original research review and search. These reports included Berman, 1995; Cahill and James, 1992, Pew, 2012; Public Financial Management, 2011; and Spiotto et al., 2012.

Ron,
Here are some specifics about Financial Review/Control Boards in Connecticut.
Any discussion of review/control boards has to begin with the Home Rule provisions of our state constitution which restrict the state legislature’s ability to pass legislation concerning a single community. That is true even if the community requests the legislation.
Specifically, Section 1 of Article Tenth provides that, “After July 1, 1969 the General Assembly shall enact no special legislation relative to the powers, organization, terms of office or form of government of any single town, city of borough … There are three narrow exceptions to this constitutional prohibition only one of which (borrowing power) applies here.
Not surprisingly in light of this legal framework, all three of Connecticut’s review/control boards have been created in circumstances where the community had either lost access to the credit markets and/or required a state guarantee in order to sell bonds. The last time I looked Bridgeport had an investment grade credit rating and access to the credit markets.
Based on the law and the facts as they exist today it appears doubtful whether the legislature could constitutionally establish a review/control board even if it wanted to.

Connecticut Review Boards
Over the last thirty years Connecticut has had three financial review boards. The first was Bridgeport in 1988, followed by West Haven (early ’90s) and Waterbury, which started in 2001. Since then the General Assembly has shown little inclination to appoint new review boards. Indeed, last year when the new Mayor of Hartford, who had served as the Governor’s Legal Counsel, sought the appointment of a limited review board both the legislature and his former boss basically ignored the request.

Powers
Despite some suggestions to contrary all three financial review boards had substantial powers over local financial plans, budgets and even daily operations. The Bridgeport board did not have control over labor contracts. The Waterbury board was essentially the arbitrator for municipal labor contracts. Its use of those powers–and the fairness of its process–were highly controversial.

Members
The number of Bridgeport residents who served on its review board was always less (at times substantially less) than a majority of the 11 members. That was true even though Tony Milano, a Bridgeport resident and the Secretary of the state Office of Policy and Management, was a statutory member of the board through 1990.
Milano and the board’s Vice Chairman, David Carson were both members of the Charter Revision Commission, chaired by Carson, which produced the revision passed is 1992.

QUALIFICATIONS
Only the Waterbury review board law specified qualifications for some–but not all–of its members. That law required three of the members have municipal accounting, financial or government service. In practice appointing authorities defined those terms broadly.

What was BPT, Waterbury and West Haven’s access to credit when they last had FCBs? Just recently, one of the three major credit rating agencies, Moody’s Investors Service, has downgraded its financial outlook for the city to negative, A2.

The three FCBs were appointed for very different reasons. Waterbury’s was appointed due to a high deficit/budget ratio. West Haven was about to default on a $13 million debt payment. BPT had been denied declaring bankruptcy protection. When the Connecticut legislature first addressed the Bridgeport emergency in 1988, the city had a projected cumulative deficit of $60 million, including an anticipated $20 million shortfall for the current fiscal year, 1987-88. We just had a $20 million shortfall for the current fiscal year and do not have a good idea on what the cities projected cumulative deficit is.

There has been much discussion about the need for better control and accounting measures in regard to city finances. Obviously, this is a very critical area of city administration/management. All operational entities with standing needs (as well as contingency-based needs), in the context of fragile, limited/fixed incomes must, of necessity, know where every dollar is coming from and where it is going to go. Bridgeport needs to know all of its fiscal-year expenses, as well as income, to the dollar, lest emergencies/unforeseen income shortfalls and/or expenses create an essential-services-compromising domino effect.

So JML and David Walker are correct; Bridgeport needs to employ accurate, standardized fiscal accounting methods in the context of a policy of regular, accurate reporting to the taxpayers. That is the essential first step in establishing fiscal prudence in municipal financial matters by way of instilling confidence in the public/business community in regard to the actual state of the city. This latter condition is a requisite condition of rebuilding our tax base.

Right now, it seems as if occult accounting practices are allowing mismanagement of limited city resources and causing much (destructive) suspicion and mistrust among the public and business community. Not good when trying to maintain a stable public safety situation and business climate in the city.

Financial Review Board or Financial Control Board. Who gives a $#!+ what it’s called?! We need a situation where the public feels confident the city is operating prudently and in the long-term interest of the public/taxpayers. Too many people don’t feel confident about the state of our city, or its future, and have a very deep distrust of our municipal government. And, all things considered, in the context of the past five dysfunctional decades of Bridgeport city government, that distrust is not unwarranted.

Recall that the Bucci fiscal crisis occurred in a context of the city not even knowing, to any reasonable degree, what it had ($) or even all it owed ($). That was also the apparent operant situation at the point of transition between the Finch and Ganim II administrations.

Very, very bad. We know, pretty accurately, that we have a ridiculously inadequate grand list that isn’t even a skeleton of what we had 60 years ago (in equivalent dollars), much less what we need to operate as a viable city in 2016. But at the same time, we have an occult municipal accounting system that doesn’t allow accurate assessment of on-going needs, much less a system that provides accurate information concerning future needs and liabilities. This latter situation makes it very hard to plan, in regard to all aspects of necessary city planning. A city cannot continue to “wing it” and remain viable.

Standardized accounting and reporting practices amenable to modern IT methods need to be designed and implemented ASAP. This type of effort could greatly benefit via the creation and employment of an intergovernmental (state-federal-city) FRB or FCB that could provide the resources and expertise to detect and categorize all incoming and outgoing $ collected and used by the city of Bridgeport such that reporting could be continual and accurate, thus allowing correct fiduciary judgments to be made by the city, as well as allowing for appropriate fiscal economic planning by the city, in a context of public/taxpayer/business community confidence (which would allow Bridgeport to intelligently plan and execute the rebuilding of its tax base).

Let’s stop splitting hairs and bickering about what to call that oversight panel, which we all agree our city needs. Let’s convene a public meeting with relevant state/federal/city officials and get things moving to create an FRB or FCB ASAP. (David Walker and JML would seem to be the people who would be in the best position to give this ball its first official push. It’s an election year. It shouldn’t be too hard to get some incumbent candidates here to have such a meeting. For what it’s worth, I’m willing to lend a hand in this regard.)

Jeff Kohut nails it. Bridgeport cannot ever improve until we put our financial house in order. Both David Walker and JML have documented the city’s current financial mismanagement and anyone who has lived here knows things have not improved over the past 20 years, they have gotten worse. Having an independent financial board that is empowered to make the hard choices that in time will be the tide to lift all boats. Without an environment where people want to buy homes in Bridgeport and start businesses in Bridgeport we will never have the tax revenue to take the city out of the red and that hurts everyone.

Thank you David Walker for addressing the financial realities for Bridgeport and, in effect, the State of Connecticut.

Those who would like to continue with the rotten status quo, which in light of the 29% mil rate increase is driving seniors on fixed incomes from their homes, you have your reasons, most of them selfish it seems to me.

Phil Smith’s information, nor any other information provided herein to date, does not kill the need for outside oversight of Bridgeport’s or other CT municipalities’ troubled finances. In addition, it does not preclude solutions that could be achieved with political leadership from Governor Malloy and our state legislature. It is possible to find better ways, if we can try to come out of our comfort zones, do the work that’s needed, and find sensible compromise for the greater good, for the here and now and the long term.

I would bet my house, Ron Mackey, that if the state and its cities can do this outside of bankruptcy, you’ll never have to part ways with your current pension. However, if bankruptcy happens, I wouldn’t be so sure. Your thoughts?

Ultimately, hospital staff trying to fight Zika with limited running electricity and water or educators running crowded classrooms may not care right now about the long-term ramifications of PROMESA. Emergencies call for emergency action, and more often than not, those actions require compromises of the kind that leave every side unhappy. PROMESA will probably save lives and will likely save many people from financial ruin. But it also promises a new round of debate about just what Puerto Rico is, who Puerto Ricans are, and what place the United States has in the commonwealth’s affairs.

Pete, Jeff, slow your roll, back up and read what Phil Smith has stated about any type of boards concerning the financial condition of the City. You guys never mention anything about Dr. Ukeles and the Management Advisory Committee Report. The charter revision commission intended or expected the City Council to take over the role of the Financial Review Board. That would have been inappropriate for a number of reasons.

What it did try to do is to institutionalize the reforms recommended by Dr. Ukeles and the Management Advisory Committee, as well as the lessons learned during the review board period. Central to that was improving both the quantity and quality of information available to the administration, the Council and the public.

I absolutely agree the council, and frankly the administration, have failed to make the best possible use of both the information and the powers provided in the Charter. This is from Phil Smith. JML and Dave Walker were nowhere around when all this was happening. The City already has a master plan, a road map to guide change and it needs to be reviewed and the combination with any type of review/control board.

Response: Despite protests to the contrary, Title III of H.R. 4900 is clearly designed to mimic Chapter 9 bankruptcy. The main differences are that it actually subjects even more debts to the process than allowed by U.S. states, and that the process is initiated by an oversight board instead of the government.

Claim: Even though it provides a bankruptcy process on the back-end, voluntary negotiations on the front-end will prevent Chapter 9 provisions from taking effect.

Response: In the first stage, the oversight board will offer a comprehensive restructuring plan, and each bond pool can vote to accept their place in the plan. The vote is not strictly on the merits of the plan though, as those who can’t get enough yes votes will be dumped into Chapter 9 bankruptcy along with over $40 billion worth of unfunded pension liabilities. With this as the alternative, suggesting the first stage is simply “voluntary” leaves out important context.

Sounds like a voluntary bankruptcy proceeding to me. Or maybe involuntary proceeding but we won’t call it that.

Here’s an idea. If, oh say, the chief of police or the current city attorney is collecting both pension and full salary, restructure so they can choose pension only or salary only, whichever is better for their tax and budget purposes. City employees serving in state house, reduce their city salaries by what the state pays. It’s what other cities and towns do, does Bridgeport? Does anyone really know? Or, let a bankruptcy judge order who gets paid and how, without any obligation holder input. Usually in a divorce agreement, the better ones are where both parties leave without getting everything they wanted and this situation feels like the citizens certainly want to divorce this administration.

Jennifer, Jennifer, I can’t remember how many times firefighters like myself, Don Day, Andy Fardy and others have spoken out about this for years, but nothing. The system of double-dipping first started with Fire Chief Rooney and the floodgates have never been closed, even today.

Jen–People seem to hate the ‘double dipping’ idea despite it may be good for the city. Take Chief Rooney for example. I believe his post-retirement pay was less than the pay of the guy who replaced him. That saved the city money. Rooney was going to collect his pension regardless of where he worked. That is a wash for the city. Someone was going to be fire chief. Whether it was Rooney or someone else is a wash. While Rooney was working post retirement the city did not have to pay a pension benefit or a healthcare benefit. That is a bonus for the city. This assumes Rooney was a competent fire chief, did the full job and served well. Under your proposal Rooney would have stayed fire chief and the city would have kept paying his benefits.
Rooney’s double-dipping bonuses to the city:
Lower pay cost to the city. (Rooney had an increased income because he collected both incomes but we do not care about his advantages. We only care if it was good or bad for the city.)
No health insurance cost.
No pension cost.

Irrelevant matters:
The city (or someone) would pay Rooney’s pension and the city would pay a fire chief regardless if the fire chief were Rooney or not.

Rooney’s double-dipping negatives to the city:
If you can think of one please list it.

Not sure, but pay the salary and into the benefits, and not the pension until the employee really retires. Don’t have the numbers to crunch, but logic says paying into benefits is less than paying salary, benefits and pension. I have no issue with a retiree coming back to work, especially if they are competent and retirement pay stops. I see your point about hiring a new person and the cost associated with that. Something a qualified financial professional can analyze and show the real numbers would be prudent, I would think.